Infrastructure Concession Glossary

Plain-language definitions of the concession, public-private partnership, and project-finance terms used across the infrastructure industry.

Last updated July 29, 2026

BOT (Build-Operate-Transfer): A project delivery model in which a private party builds an asset, operates it for a defined concession term, and then transfers it to the public grantor. The private party typically recovers its investment through user charges or payments during the operating period.

BOOT (Build-Own-Operate-Transfer): A variant of BOT in which the private party owns the asset outright during the concession term before transferring it to the public authority at the end. Ownership during operation distinguishes it from a standard BOT structure.

BTO (Build-Transfer-Operate): A model in which the private party builds the asset and transfers legal ownership to the public authority immediately on completion, then operates it under a concession. The early transfer is often used where public ownership of the asset is legally required.

BOO (Build-Own-Operate): A structure in which the private party builds, owns, and operates the asset indefinitely, with no obligation to transfer it back to the public sector. It is common where the asset does not need to revert to public control.

DBFOM (Design-Build-Finance-Operate-Maintain): An integrated model bundling design, construction, financing, operation, and maintenance into a single long-term contract with one private party. Bundling is intended to align incentives across the asset's whole life cycle.

PPP (Public-Private Partnership): A long-term contractual arrangement in which a private party delivers a public asset or service and bears significant risk and management responsibility. The term covers a broad family of structures, including concessions and availability-based contracts.

PFI (Private Finance Initiative): A form of PPP, originating in the United Kingdom, in which a private party finances, builds, and maintains public infrastructure and is repaid through unitary payments over the contract term. It is typically associated with availability-based social infrastructure.

P3: A common abbreviation for public-private partnership, used particularly in North America. It refers to the same family of long-term arrangements between public authorities and private parties.

Concession Agreement: The principal contract between a grantor and a concessionaire that sets out the rights and obligations governing a concession. It defines the term, service standards, payment or tariff mechanisms, risk allocation, and termination provisions.

Concession Term: The defined period during which the concessionaire holds the right to operate the asset and earn revenue. At the end of the term the asset is typically handed back to the grantor or the concession is re-tendered.

Grantor: The public authority that awards a concession and grants the right to build or operate an asset. The grantor sets the terms of the concession and oversees the concessionaire's performance.

Concessionaire: The private party that holds a concession and is responsible for delivering and operating the asset under the concession agreement. It is often a dedicated project company formed specifically for the concession.

Special Purpose Vehicle (SPV): A standalone legal entity created solely to hold and deliver a single project or concession, ring-fencing its assets and liabilities. Lenders and investors use the SPV structure to isolate project risk from their other activities.

Offtaker: The party that agrees to purchase the output or capacity of a project, such as electricity or treated water, usually under a long-term contract. A creditworthy offtaker underpins the revenue certainty lenders rely on.

Power Purchase Agreement (PPA): A long-term contract under which an offtaker agrees to buy electricity from a generator at agreed prices and volumes. It provides the revenue framework that supports financing of power projects.

Availability Payment: A payment made to a concessionaire based on the asset being available to a required standard, rather than on how much it is used. It shifts demand risk away from the private party and toward the public authority.

Shadow Toll: A payment made by the public authority to a concessionaire based on the number of users of an asset, such as vehicles on a road, rather than tolls charged directly to users. Users do not pay at the point of use.

Demand Risk: The risk that actual usage of an asset differs from forecasts, affecting revenue. Whether the public or private party bears this risk is a central design choice in concession structures.

Construction Risk: The risk that a project is delivered late, over budget, or not to specification during the build phase. It is frequently passed to a construction contractor under a fixed-price, fixed-date arrangement.

Termination for Convenience: A contractual right allowing the grantor to end a concession without the concessionaire being at fault. Such terminations typically trigger defined compensation to the private party.

Termination for Default: The ending of a concession because one party has failed to meet its contractual obligations. Compensation, if any, is usually lower than for termination for convenience and reflects the defaulting party's breach.

Termination Compensation: The amount payable when a concession ends early, calculated under the formulas set out in the concession agreement. The basis for the payment usually depends on the reason for termination.

Hand-back: The return of the asset from the concessionaire to the grantor at the end of the concession term. Agreements commonly specify the condition the asset must be in when handed back.

Extension Option: A provision allowing the concession term to be lengthened beyond its original end date, subject to defined conditions. Extensions may be used to reflect additional investment or to renegotiate terms.

Re-tender: The process of competitively awarding a concession again, typically as an existing concession nears expiry. It gives the grantor an opportunity to reset terms and select a new or incumbent operator.

Renegotiation: A change to the terms of an existing concession agreed between the grantor and concessionaire after award. Renegotiations may address changed circumstances, disputes, or additional investment.

Financial Close: The point at which all financing agreements for a project are signed and conditions are met so that funds can be drawn. It marks the transition from development to implementation of a project.

Commercial Operations Date (COD): The date on which an asset formally begins commercial service and can start earning contracted revenue. It is a key milestone for testing, acceptance, and the start of payment obligations.

Regulated Asset Base (RAB): The value of assets on which a regulated utility is permitted to earn a return, as determined by its regulator. It forms the basis for setting allowed revenues and tariffs.

Allowed Return: The rate of return a regulator permits a regulated business to earn on its asset base. It is intended to compensate investors for the cost of capital while protecting customers.

Price Review: A periodic regulatory process that resets the prices or revenues a regulated business may charge over a control period. It typically reassesses costs, investment plans, and the allowed return.

Tariff Indexation: A mechanism that adjusts tariffs over time by reference to an index, such as inflation. It preserves the real value of revenues without requiring case-by-case renegotiation.

Concession Fee: A payment made by the concessionaire to the grantor for the right to operate the asset. It may be a fixed sum, a periodic payment, or a share of revenue.

Minimum Revenue Guarantee: A commitment by the grantor to top up a concessionaire's revenue if it falls below an agreed floor. It reduces the concessionaire's exposure to demand risk.

Viability Gap Funding: Public financial support provided to make an otherwise commercially unviable project attractive to private investment. It typically takes the form of a capital grant covering part of project costs.

Brownfield: An existing, operational asset, as opposed to one that has yet to be built. Brownfield concessions carry construction risk that is largely already resolved.

Greenfield: A new asset that must be designed and constructed before it can operate. Greenfield projects carry construction and ramp-up risk that brownfield assets do not.

Asset Recycling: A strategy in which a public authority leases or sells existing assets to private investors and reinvests the proceeds in new infrastructure. It aims to fund new investment without additional public borrowing.

ICSID: The International Centre for Settlement of Investment Disputes, a World Bank Group institution that arbitrates disputes between states and foreign investors. Concession agreements sometimes specify ICSID as the forum for resolving disputes.

EPC Contract: An Engineering, Procurement and Construction contract under which a contractor delivers a completed asset, often for a fixed price and date. It is the primary vehicle for passing construction risk to a builder.

O&M Contract: An Operations and Maintenance contract under which a party is engaged to run and maintain an asset to agreed standards. It allocates operating performance responsibilities during the concession term.

Change in Law: A contractual provision addressing the effect of new or amended laws on a concession after it is signed. It typically sets out how resulting cost or revenue impacts are shared between the parties.

Step-in Rights: Rights allowing a party, often lenders or the grantor, to take over operation of a concession in defined circumstances such as default. They are a protective mechanism to keep essential services running.

Value for Money: An assessment of whether a procurement approach delivers the best combination of cost, quality, and risk transfer over the life of a project. It is often used to justify choosing a PPP over conventional public delivery.

Public Sector Comparator: A benchmark estimating what it would cost the public sector to deliver a project itself, used to test the value for money of a private-delivery option. It is a standard tool in appraising PPP proposals.